An investor has decided to invest $175.00 per month in a mutual fund. This type of mutual fund has historically returned an average of 5.75% per year over the last 10 years. The investor understands that historical returns are not indicative of future returns, but wants to project a potential amount that might be available after 5 years of making these monthly investment. What amount might be available at the end of the 5-year period using this historical return number?

An investor has decided to invest $175.00 per month in a mutual fund. This type of mutual fund has historically returned an average of 5.75% per year over the last 10 years. The investor understands that historical returns are not indicative of future returns, but wants to project a potential amount that might be available after 5 years of making these monthly investment. What amount might be available at the end of the 5-year period using this historical return number?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The following table shows the average returns for some of the largest mutual funds commonly found in retirement plans. (Assume end-of-month deposits and withdrawals and monthly compounding, and assume that the quoted rate of return continues indefinitely.) Mutual Fund $ Rate of Return Fidelity Growth Company 14.83% Vanguard 500 Index 13.25% PIMCO Total Return Stock fund 2.77% Type Stock fund For the past 15 years you have been depositing $600 per month in the PIMCO bond fund, and you have now transferred your current balance to the Vanguard bond fund, where you plan to continue depositing $600 per month until you retire in 20 years. How much can you anticipate having in the investment when you retire? HINT [See Example 1.] (Round your answer to the nearest cent.) Vanguard Total Bond Market Index Bond fund 2.67% Bond fund
A fund manager owns a portfolio of 10 stocks. Explain how the manager can reduce the systematic risk of his portfolio by 10% over the next year using futures. Will the expected return on the manager’s portfolio also drop by 10%? Is it possible for the manager to perfectly hedge his exposure to equity risk? Explain your answers.
The following table shows the average returns for some of the largest mutual funds commonly found in retirement plans. (Assume end-of-month deposits and withdrawals and monthly compounding, and assume that the quoted rate of return continues indefinitely.) Mutual Fund Fidelity Growth Company Vanguard Vanguard PIMCO 500 Index Total Return Total Bond Market Index Rate of Return 15.83% 14.25% 3.77% 3.67% Type Stock fund Stock fund Bond fund Bond fund For the past 25 years you have been depositing $500 per month in the PIMCO bond fund, and you have now transferred your current balance to the Vanguard bond fund, where you plan to continue depositing $500 per month until you retire in 30 years. How much can you anticipate having in the investment when you retire? HINT [See Example 1.] (Round your answer to the nearest cent.) $
The following table shows the average returns for some of the largest mutual funds commonly found in retirement plans. (Assume end-of-month deposits and withdrawals and monthly compounding, and assume that the quoted rate of return continues indefinitely.) Mutual Fund Fidelity Growth Vanguard PIMCO 500 Index Total Return Company Vanguard Total Bond Market Index Rate of Return 15.83% 13.25% 2.77% 3.67% Туре Stock fund Stock fund Bond fund Bond fund You wish to establish a trust fund from which your heirs can withdraw $10,000 per month for 20 years, at the end of which time they will receive $20,000. How large should the trust be if invested in the Fidelity stock fund? HINT [See Example 3.] (Round your answer to the nearest cent.) $
You are considering investing in a mutual fund. The fund is expected to earn a return of 12 percent in the next year. If its annual return is normally distributed with a standard deviation of 4.50 percent, what return can you expect the fund to beat 95 percent of the time? what is the expected return(%)?
The following table shows the average returns for some of the largest mutual funds commonly found in retirement plans. (Assume end-of-month deposits and withdrawals and monthly compounding, and assume that the quoted rate of return continues indefinitely.) MutualFund FidelityGrowthCompany Vanguard500 Index PIMCOTotal Return VanguardTotal BondMarket Index Rate ofReturn 15.83% 14.25% 3.77% 3.67% Type Stock fund Stock fund Bond fund Bond fund For the past 15 years you have been depositing $400 per month in the PIMCO bond fund, and you have now transferred your current balance to the Vanguard bond fund, where you plan to continue depositing $400 per month until you retire in 20 years. How much can you anticipate having in the investment when you retire? HINT [See Example 1.] (Round your answer to the nearest cent.) $
The following table shows the average returns for some of the largest mutual funds commonly found in retirement plans. (Assume end-of-month deposits and withdrawals and monthly compounding, and assume that the quoted rate of return continues indefinitely.) MutualFund FidelityGrowthCompany Vanguard500 Index PIMCOTotal Return VanguardTotal BondMarket Index Rate ofReturn 14.83% 14.25% 2.77% 2.67% Type Stock fund Stock fund Bond fund Bond fund How much would be accumulated after 35 years in a retirement account invested entirely in the Vanguard stock fund with payments of $340 per month? HINT [See Quick Example 1.] (Round your answer to the nearest cent.)
A year ago, an investor bought 600 shares of a mutual fund at $7.64 per share This year, the fund has paid dividends of $0.72 per share and had a capital gains distribution of $0.54 per share. a. Find the investor's holding period return, given that this no-load fund now has a net asset value of $8.23. b. Find the holding period return, assuming all the dividends and capital gains distributions are reinvested into additional shares of the fund at an average price of $7.86 per share a. Given that this no-load fund now has a net asset value of $8.23, the investor's holding period return is% (Round to two decimal places)
You are considering investing in a mutual fund. The fund is expected to earn a return of 13 percent in the next year. If its annual return is normally distributed with a standard deviation of 17 percent, what return can you expect the fund to beat 95 percent of the time? (Note: Write your answer as decimals with three decimal places. For example, if you answer is -8.7%, you should write -0.087 in the answer box. DO NOT write -8.7 in the box as you will be marked wrong).

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